National Power Tariff Policy

Union Cabinet has approved several amendments to the national power tariff policy with a view to promote renewable energy and improve the ease of doing business for developers in the sector.

The policy also seeks to “create a win-win between the generator, utilities and consumers” by allowing power generators to sell their surplus power on the power exchange and sharing the proceeds with the state government.

The amendments are based on four Es—electricity for all, efficiency that will ensure affordable tariffs, the environment, and ease of doing business to attract greater investment in the sector

Features of the amendment:

Power companies are allowed to pass costs on to consumers arising out of any changes in taxes, cesses and levies levied on them.

The amended tariff policy also imposes a renewable energy obligation on new coal or lignite-based thermal plants, requiring them to establish or purchase renewable capacity alongside their own generation units. This provision is very important as it will be a big boost for renewable energy.

Mandates that no inter-state transmission charges will be levied until a time to be specified by the government.

To encourage efficiency, the policy allows power producers to expand up to double their capacity through the automatic route, at their existing unit locations. This automatic approval was earlier limited to 50 per cent capacity expansions.

The tariffs for multi-state power projects will be determined by the Central Electricity Regulatory Commission, thereby removing a major point of uncertainty to do with such projects.

The power regulator has to come up with a clear action plan to ensure 24×7 power supply to all consumers by 2021-22 or earlier. Towards the power for all initiative, the policy enables the creation of micro-grids in remote villages as yet unconnected to the grid, and also says that these micro-grids can sell their surplus power to the grid when it reaches those areas.

Issues: It could add to generating companies’ stress. There are generating companies that are already stressed as they are not being able to sell the power they generate. Now they will have to purchase renewable power, which will add to their stress